Softer US inflation data reduces Fed rate hike expectations, pressuring the USD while geopolitical risks limit JPY gains.
The USD/JPY pair fell below 162.00 in Asian trading, extending losses for a second session as the US Dollar weakened. Markets scaled back Federal Reserve rate hike bets after softer-than-expected US consumer inflation data on Tuesday, undermining the USD.
The Japanese Yen found modest support from potential intervention risks, though escalating US-Iran tensions capped aggressive JPY buying. The US launched airstrikes on Iran, which retaliated with attacks on US assets in Gulf countries, keeping geopolitical risks elevated.
Japan’s economic vulnerability to energy supply disruptions in the Strait of Hormuz and a wide US-Japan interest rate gap further restrained JPY bulls. The carry trade remains favored due to the rate differential, limiting the pair’s downside.